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People in Debt Targeted for Fraud and Scams
When faced with big problems such as high debt, people often let their guards down in pursuit of solutions, and thus make themselves easier targets for credit scams and fraud.
Among the top 10 frauds identified in a Federal Trade Commission (FTC) survey, the main type of fraud; affecting 5 million consumers, is a combination of three categories of credit scams (Credit Card Insurance: 2.1 million; Advance Fee Loans: 1.7 million; and Credit Repair Scams: 1.2 million). The complete list of the top ten scams are:
- Fraudulent Weight-Loss Products (4.8 million victims)
- Foreign Lottery Scams (3.2 million victims)
- Unauthorized Billing - Buyers Clubs (3.2 million victims)
- Prize Promotions (2.7 million victims)
- Work-at-Home Programs (2.4 million victims)
- Credit Card Insurance (2.1 million victims)
- Unauthorized Billing - Internet Services (1.8 million victims)
- Advance-Fee Loans (1.7 million victims)
- Credit Repair Scams (1.2 million victims)
- Business Opportunities (.8 million victims)
Roughly 30.2 million Americans; that's about 13.5% of the adult population, fell victim to fraud in 2005, and the survey didn't include any statistical data regarding identity theft.
People who admit taking on more debt than they can comfortably handle are more likely to fall victim to fraud than people who feel in control of their finances, even when the scam is unrelated to money. Debt-swamped adults, for example, were three times as likely to have fallen for weight-loss scams.
Younger consumers are more likely than seniors to fall victim to the surveyed scams. About 17 percent of people 25 to 34 fell victim to frauds, compared with about 10 percent of those 65 to 74.
Consumers were most likely to lose money to fraudulent weight-loss products. About 4.8 million Americans are estimated to have lost more cash than weight on fads such as diet supplements, skin patches, creams, wraps and weight-loss earrings.
Foreign lotteries and bogus buyers' clubs, in which consumers were billed for a membership they never agreed to, took in the next biggest group of consumers, followed by fraudulent prize promotions and work-at-home schemes.
Although scam victims are found in all income groups, people who make less have a greater chance of becoming fraud victims than their wealthier neighbors. The FTC learned people who earn less than $20,000 are 51 percent more likely to be scam victims than people who make $40,000 to $60,000.
More Hispanics and blacks fall victim to scams than non-Hispanic whites, but the FTC says the differences aren't statistically significant once the groups are adjusted for income and other factors. In fact, the study notes Hispanics and blacks surveyed "were likely to be younger, less likely to have completed college and more likely to report having more debt than they can handle - all characteristics associated with a higher likelihood of being a victim."
The estimates were drawn from a telephone survey of 3,888 adults conducted between Nov. 16 and Nov. 20, 2005.
The single category (not adding similar categories) which resulted in the highest amount of victims, was for Fraudulent Weight-Loss Products, accounting for 4.8 million U.S. consumers. Fraudulent foreign lottery offers and buyers club memberships tied for second place in the survey. Lottery scams occur when consumers are told they have won a foreign lottery that they had not entered. Victims supplied either personal information such as their bank account numbers or paid money to receive their "winnings." In the case of buyers clubs, victims are billed for a "membership" they had not agreed to buy. An estimated 3.2 million people were victims of these frauds during the period studied.
"The FTC uses a one-two punch to fight fraud," said Lydia Parnes, Director of the FTC’s Bureau of Consumer Protection. "Our enforcement program stops the most widespread and egregious practices, and our education program helps alert consumers to the tricks of the fraud trade. We encourage everyone to click on our Web site – ftc.gov – not only to find out how to recognize a scam, but also to report it. That’s the best way to help end rip-offs of all kinds."
Fraudulent prize promotion schemes ranked fourth in the fraud survey, with an estimated 2.7 million victims reporting making a purchase, a payment, or attending a sales presentation to receive a prize that either was never delivered or was not what the consumer expected.
Work-at-home programs, in which the purchaser earned less than half of the income the seller had promised, ranked fifth among the fraudulent schemes covered by the survey. An estimated 2.4 million individuals fell victim to these schemes, and many purchased more than one fraudulent work-at-home program.
Twenty percent of African Americans and 18 percent of Hispanics are estimated to have been victims, while the rate for non-Hispanic whites was 12 percent. In addition, the survey found that younger consumers, those who did not complete college, and those with high levels of debt were more likely to be victims of fraud. Consumers between 65 and 74 years of age were 32 percent less likely to report having experienced fraud than those between 35 and 44.
Consumers also reported falling victim to other specific scams, including pyramid schemes.
Print advertising – direct mail, including catalogs, newspaper and magazine advertising, and posters and flyers – was used to pitch fraudulent offers in 27 percent of reported incidents. The Internet, including Web sites, auction sites, and e-mail, was used to make 22 percent of the fraudulent pitches. Television or radio accounted for 21 percent of the pitches, and telemarketing accounted for nine percent.
The FTC offers these tips for consumers:
- Know who you’re dealing with: Do business only with companies that plainly provide their name, street address, and phone number.
- Protect your personal information: Share credit card and other personal information only with companies you know and trust; never share it in email, regardless who is asking for it.
- Take your time: Resist the urge to act now. Most any offer that’s good today will be good tomorrow, too.
- Read the small print: Get all promises in writing and read all paperwork before paying any money or signing any contracts.
- Free means free: Throw out any offer that says you have to pay to get a gift or for something that’s called "free." If something is free or a gift, you shouldn’t have to pay for it.
- Report fraud: If you think you’ve been a victim of fraud, report it. It’s one way to get even with a scam artist who cheated you. Complain online at ftc.gov or by phone at 1-877-FTC HELP.
The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, click http://www.ftc.gov/ftc/complaint.shtm or call 1-877-382-4357. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to more than 1,600 civil and criminal law enforcement agencies in the U.S. and abroad.
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